Visio Lending is a hard money lender that specializes in making loans to long-term rental investors. The lender has seen rapid growth in recent years and has a good reputation with property investors. Read on to learn about this financing option and whether it’s right for you.
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What Is Visio Lending?
Visio Lending bills itself as the only national lender focused exclusively on lending to buy-and-hold real estate investors. Its loans are useful for cashing out, refinancing, and purchasing primarily single-family properties.
Visio does not target fix and flip investors or other short-term real estate investors. It says its typical borrowers are looking to hold on to properties for many years and perhaps bequeath the properties to their estates.
According to the company, these permanent rental investors tend to take out 30-year fixed-rate loans. Some pay up-front fees to get lower interest rates, which otherwise tend to be higher than conventional mortgages.
Visio was started in 2012 and is based in Austin, Texas. They are also expanding very quickly. The company experienced growth of nearly 85 percent in loan originations in 2018. In the first quarter of 2019, Visio reported originating a record $87.4 million in loans.
The company has a nationwide footprint. It operates in 38 states and the District of Columbia. Should you need to contact the company, you can do so here:
1905 Kramer Lane, Ste. B700
Austin TX 78758
Visio currently has two main loan product lines. The primary one is its flagship Rental 360 product. It also has a loan product strictly for vacation rental owners.
Visio’s Rental360 is specifically for rental property investors. The features of this loan program include:
- Loan amounts of $75,000 to $2 million
- Interest rates from 6 percent to 12 percent
- Standard origination fees of 2 percent
- Closing costs of 2 percent to 5 percent
- Terms from 24 months to 30 years
Other terms include:
- No balloon payment
- No tax returns or other personal financial information required
- Qualification based on property cash flow
- Up to 75 percent loan-to-value for refinancing loans
- Up to 80 percent loan-to-value for purchase loans
According to Visio, it takes about 24 hours to approve loans. Closings can occur within 21 days. Visio also offers borrowers 30-day ownership seasoning. This means rental investors can grow their property portfolios faster since they don’t have to wait to acquire additional properties.
Rental360 borrowers can also take out loans under their business name rather their own name. This allows them to protect their identities and also shield other assets from creditors.
Visio positions Rental360 as suitable for permanent financing like a 30-year mortgage. Like other hard money lenders, Visio’s rates and fees are higher than borrowers would get from a conventional mortgage lender.
Rental360 borrowers can buy down their rate, keeping the Visio loan as long-term financing. However, many borrowers use the hard money loan as bridge financing and seek a 30-year conventional mortgage after a year or so.
As an example of a recent Rental360 loan, Visio points to a cash-out refinance loan on a single-family home in North Chesterfield, Virginia. The 30-year fixed-rate loan for $112,000 carried an origination fee of 5 percent, including 0.9 points to buy down the interest rate.
Visio’s vacation rental lending program is suitable for cashing out, refinancing or purchasing a property for vacation rentals. It can be used for a single home or a portfolio of properties.
Visio promises to use common sense when evaluating short-term rents for underwriting. Its vacation rental loans are for 30 years, so there are no looming balloon payments after a few years.
Again, the company doesn’t require tax returns or other personal income verification. It will loan up to 70 percent of the value of the property for refinances. Loan amounts go up to 75 percent of value for purchases.
Other features of the vacation rental loan program, such as 30-day seasoning are the same as the Rental360 program.
As an example of a recent vacation rental loan, Visio points to a $203,000 cash-out refinance on a three-unit property in Atlantic City, New Jersey. For this loan the borrower chose a 30-year fixed-rate loan.
Adjustable Rate Interim Financing
Visio also offers two kinds of adjustable rate, 30-year mortgages (ARMs) under the Rental360 banner. There is a 5/1 ARM that adjusts annually after five years. A 7/1 ARM that adjusts annually after seven years is also available.
These loans are intended for shorter-term investors who may sell their property within a few years, Visio says. For these loans Visio offers an option for a 1 percent or lower origination fee, to keep upfront costs manageable.
Visio Lending Pros and Cons
As with any balanced review, we think it’s important to highlight the pros and cons. Below is what we think makes Visio Lending great, but also some drawbacks to using it.
Pros (what we like)
One of Visio’s advantages compared to conventional mortgage lenders is that borrowers don’t have to provide tax returns or other income verification. For underwriting purposes, the company doesn’t look at debt-to-income ratios (DTI), as conventional lenders do.
Nor will Visio ask borrowers to put up equity in their personal residences to secure a loan on an investment property.
The main thing Visio uses to qualify borrowers is a modified Debt Service Coverage Ratio (DSCR) figure. Most lenders calculate DSCR by dividing annual net operating income (NOI) by annual debt service payments.
Visio uses a different formula to figure DSCR. It takes the monthly mortgage payment including principal, interest, and taxes, plus insurance and association dues (PITIA). It divides this number by the gross monthly rent.
For example, say a property has PITIA of $800 per month. The gross monthly rent is $1,000. In this case the DSCR would come to $1,000 divided by $800 or 1.25.
A DSCR greater than 1.2 is considered good. Anything over 1.5 is excellent. The DSCR affects the interest rate in addition to affecting qualifying. A higher DSC is likely to get lower rates.
A Visio borrower with a DSCR below 1.2 can improve it by increasing the down payment to lower the loan amount and payment. Another route to a higher DSCR is to increase the rent, perhaps after rehabbing the property.
If those aren’t options, a borrower can try to improve his or her personal credit score. This can get better rates, again lowering the payment. Visio’s minimum credit score 640. It takes the middle score from the three main credit reporting bureaus: TransUnion, Experian and Equifax.
The company also requires borrowers to have no recent bankruptcies, foreclosures, or short sales. And borrower must not have made a late mortgage payment in the last 12 months.
While Visio does have requirements for DSCR, credit score and credit history, borrowers don’t have to show their personal income is enough to cover the payments. That means no tax returns, employment verification or accounting for child support or personal home mortgage payments.
Visio Cons (what we dislike)
Because it’s strictly focused on long-term rental investors, Visio may not be the best choice for fix and flip or short-term investors. Short-term investors may be better off using private money, home equity loans, or bank mortgages.
Like most hard-money lenders, Visio has higher fees and interest rates than conventional mortgage lenders. Borrowers can pay upfront to reduce their interest rates, but loans are generally more expensive than with conventional loans.
Visio Lending Roundup
Visio Lending is a fast-growing lender that focuses on long-term single-family rental property investors. Its loans have higher cost than conventional mortgages. But borrowers can qualify without proving income.
And its adjustable rate products are good for interim financing of properties investors hope to sell in a few years. If you’re looking for flexible financing without jumping through too many hoops, Visio is worth a look.